GENERAL AGREEMENT ON TRADE IN SERVICES (GATS)

What is the GATS The General Agreement on Trade in Services (GATS) was negotiated under the Uruguay Round in the Context of single undertaking. It lays down rules and disciplines covering multilateral international trade in services. The Agreement came into effect in 1995 and is part and parcel of the WTO agreements. Provides for Most favoured nation and national treatment clause.

What is a Service Service covers a wide range of economic activities and WTO secretariat has categorized this into twelve sectors which are in turn are subdivided 155 sub-sectors. Sectors: l Business and professional l Communications, all types l Construction l Distribution l Education l Environment l Insurance and financial l Health and social l Tourism l Recreation & cultural l Transport, all types l Other

Modes of Services Trade Services are traded internationally through one or a combination of the following modes: Mode1: Cross-border supply. Similar to the traditional notion of “imports” for goods trade. Occurs when a service crosses a national border e.g. the purchase of insurance or computer software by a consumer from a producer located abroad. Mode2: Consumption abroad. Services supplied in the territory of one country to the consumers of another e.g. tourism, education or health services.

Modes of Services Trade Cont…. Mode 3: Commercial presence. Services supplied through a foreign-owned company e.g. establishing a branch or a subsidiary company. Mode 4: Temporary movement of natural persons to another country, in order to provide the service there.

Main Elements of the GATS Agreement General Agreement on Trade in services provides basic disciplines and a framework for negotiations on liberalisation of services sectors. The agreement does not define the services but provides that the term service covers any service in any service sectors including their production, distribution, marketing, sales and delivery according to the four modes (Article 1.3). GATS also covers government measures affecting services which are provided on a commercial basis.

Main Elements of the GATS Agreement Cont… Its Provisions apply to all modes in which international trade services takes place, viz. Mode1: Cross-border trade: – Trade takes place from the territory of country A into that of B Mode2: Consumption Abroad – Services consumed by nationals of a country A in territory of country B. Mode 3: Commercial Presence – A service supplier of country A crosses the border to establish and provide a service in country B. Mode 4: Movement of Natural Persons – Temporary movement from country A to country B to supply a service.

Service Disciplines The Agreement has broadly two types of disciplines. One general, applying to all service sectors and second, sectoral commitments i.e. disciplines applying to specific sectors. The general commitments are included in the text of the main Agreement while the specific for sectoral commitments emerge out of the negotiations between countries and are included in country’s schedules of specific commitments. In specific commitments a country may put down terms and limitations and conditions under which services may be allowed to their market.

Most Favoured Nation (MFN) Among the general commitments, perhaps the most important one is the Most Favoured Nation (MFN) Treatment “… each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of any other country” (Article II:1)

MFN is critical - it is what makes the WTO truly multilateral This requires equal and consistent treatment of all foreign trading partners. It means: a. Providing equal opportunities in that sector for all foreign service providers. b. mutual exclusive treatment for all service providers

National Treatment This is not the same as MFN. National Treatment requires equal treatment for foreign providers and domestic providers. Once a foreign supplier has been allowed to supply a service in one’s country there should be no discrimination in treatment between the foreign and domestic providers. The Agreement does not however, as in case of goods, impose this obligation to be applied across the board in all service sectors. It requires countries to indicate in their schedules of concessions the sectors in which and conditions to which such treatment would be extended.

OTHER IMPORTANT GENERAL OBLIGATIONS Other important general obligations of members are: (1)Transparency of regulations; members are obligated to publish all domestic regulatory measures affecting services trade and to establish inquiry points from which members countries can obtain information affecting trade in services. (2)Mutual recognition of qualifications required for service suppliers. The agreement urges members to enter into bilateral or plurilateral arrangements for mutual recognition of qualifications for obtaining authorisation.

OTHER IMPORTANT GENERAL OBLIGATIONS CONT…. (3) Rules governing monopolies and exclusive service suppliers and other business practices restraining competition. Members are under obligation to ensure that service suppliers do not abuse their monopoly or exclusive rights or act in a manner inconsistent with their general or specific obligations under the agreement. (4) Measures to be taken to liberalize trade, including those securing the greater participation of developing countries. (5) The Agreements puts obligations on countries, inter alia, not to apply restrictions on international transfer and payments in sectors where they have made specific commitments except when they are in balance of payments difficulties

CONCERNS highlighted… MORE PRIVILEGE WITH NO RESPONSIBILITY FOR BIG BUSINESS: GATS is fundamentally about opening up new markets – either in new countries or in new areas like water – for transnational corporations. As the European Commission website on GATS states, “The GATS is not just something that exists between governments. It is first and foremost an instrument for the benefit of business.” VAST AND TOO FAST : The GATS negotiations seek to cover too many areas in too short an amount of time. As a result they favor rich countries which have the capacity to deal with rapid and complex negotiations. The speed of the negotiations also prevents genuine public consultation and input.

BINDING AND IRREVERSIBLE : GATS effectively ‘locks in’ all future governments to the agreement, regardless of changes in political outlook, technological advances, or newly available information. Governments have only one chance to stipulate which areas of the sector are not covered by the commitment, and once made, commitments are extremely difficult to reverse. MIRROR OF WTO DYSFUNCTIONALITY : The GATS reflects the many problems of the WTO such as the systematic exclusion of many developing countries’ perspectives through exclusive and undemocratic negotiating processes;

GATS is considered a reliable and predictable framework for facilitating trade and foreign investment in services It has been widely perceived by developing countries as a positive development in the multilateral trade framework Many commitments have been overtaken by further reforms and liberalization in both developed and developing countries What has been Achieved to date?

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